Health Advocate Blog

Teaching teens money management

Teaching kids—especially those entering their teens–how to be smart about money is a valuable foundation for ensuring their future financial wellness. It’s as important for having a healthy life as educating them about proper nutrition and exercise.

Some surveys show that only 17 percent of high school teens know how to manage money. Similarly, other figures show that, on average, about 69% are ill-prepared for the financial responsibilities that they’ll face as young adults. Yet, despite a lack of money management skills, young people open credit cards, take out student loans and buy cars—and often get in over their heads! Before they leave home for college or move out on their own, help your kids understand how to manage money so they can make smart decisions and avoid costly mistakes.

Here are some basic tips:

Encourage the habit of tracking their spending. Whether through an online tracking program or a simple written record they keep on their own, teaching them to see where their money goes is the first lesson to understanding how to budget and set limits. Check out for free income and spending tracking tools and other resources.

Open up bank accounts for them. Set up a checking account for everyday necessities and a savings account for future expenditures. Consider opening a “teen checking account” that gives you joint account holder status with complete access, while letting your teen monitor their account online with a real record of where their money is going.

Make them earn their spending money. Money earned is generally more valued than money given as gifts. Offer them opportunities to earn money through helping with household projects, or point them to outside jobs like dog walking, snow shoveling or babysitting.

Teach them how to live on a budget. For example, until their earnings are more substantial, figure out what you’re spending each month for, say, their clothing, gas and entertainment, and give this amount to them as a monthly allowance that they will have to manage and make it stretch for the month. Together, go over the dollar amount of each line item–what it will take to cover items they need and the cost for their things they want, such as going out to the movies with friends.

Instill the savings habit. Help them determine a goal for long-term saving, and how much they will need, and when they will need it.  Suggest stashing 10 percent of any earnings in savings. Tell them about “paying themselves” first.  The savings should be a line item in their budget, just like any other expense. Goal-setting teaches patience, a valuable life lesson.

Show them how money makes money, earning compound interest. It can be exciting for kids to see their balance grow for an anticipated purchase.  As an extra incentive to save, consider matching a certain percent for every dollar your child banks.

Let them in on your own savings habit. Hearing about what you put away in your emergency fund, what you do to stay out of debt, or how you saved to buy a cherished item can help kids see the real-life benefits of saving.

Discuss sharing big expenses based on their commitment to savings. If they demonstrate a dedication to saving and money management, you may discuss sharing their big expenses ahead like buying a car or college tuition.

Help them be savvy about credit. Teens can open credit cards on their own at age 18. It’s vital that they understand how interest works, and that paying only the minimum each month could escalate what they owe beyond what they can afford, drive up finance charges, and put them in serious debt. Make sure they understand that late or partial payments can damage their credit score, preventing them from getting an apartment lease, car loans or mortgage.

Mention saving for retirement. Sure, it’s a long way off, but over time and with compound earnings, starting early to save even a little bit could have a big impact on their future.

For Health Advocate members

If you are a Health Advocate member with access to our EAP+Work/Life service, call us! We can connect you with financial experts to help you ease debt, build good credit and maintain financial wellness.